Gold under pressure as liquidity crunch boosts dollar ahead of Fed meeting

Gold and silver remain under pressure into next week’s FOMC as a USD-liquidity bid and hawkishly-shifting rate expectations weigh on PMs. Spot gold was last at $5,044.80/oz, down ~2.5% vs last Friday and testing support just above $5,000; spot silver was $81.04/oz, down ~4% on the week and probing support around $81. Tastylive’s Christopher Vecchio framed the move as a crisis “liquidity trade” tied to the U.S.-Israel war with Iran: in periods of stress, investors prioritize the reserve-currency’s liquidity, and even typically liquid markets can see physical liquidity strains. He highlighted the concurrent selloff in USTs with yields back above 4% as evidence that classic safe-haven demand is muted for now; he remains cautious on metals until the liquidity-demand phase passes, noting timing is difficult and gold may “stabilize for a little while” rather than rebound immediately. Macro is reinforcing the USD: Iran-related supply chain disruption has lifted energy prices, feeding concern the Fed keeps policy restrictive for longer. BMO revised its 2026 call to two cuts (first in September) from three cuts starting in June, citing stagflation risk from oil spikes alongside slowing job growth and sticky inflation. Mind Money’s Julia Khandoshko argued crude at $100+ would keep gasoline inflation in focus and make rate-cut discussions “all but irrelevant.” FXTM’s Lukman Otunuga added that gold’s $5,000 support test is unsurprising pre-Fed and that near-term risks are skewed to the downside, with gold likely tracking the dollar into the decision. Trading implications: near-term bias stays defensive while USD liquidity demand persists and rate-cut pricing is pushed out; watch $5,000 in gold and ~$81 in silver as immediate supports, with the Fed decision next week as the key catalyst for direction. Upside risk is a post-liquidity “snapback” if funding stress eases and safe-haven demand reasserts, but timing remains the core uncertainty.